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woensdag, 16 mei 2012 10:00

Hong Kong: Gateway to China and Asia?

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You are entrepreneur, possibly with a need to purchase goods from abroad which you sell to customers elsewhere in the world. Or you intend to start a company in China. Maybe you want to set up a joint venture with your Chinese business partner. Then it is recommendable to consider the possibilities that Hong Kong offers to you. Not for nothing Hong Kong is being called the Gateway to Mainland China or even to Asia.

Hong Kong has an excellent infrastructure and has one of the biggest container harbours of the world. The most important business centres of Asia are within 4 hours flying distance from Hong Kong. Furthermore, Hong Kong has a simple tax system with a corporate profit tax rate of 16.5%, no capital tax, no dividend withholding tax and no VAT. Hong Kong has its own legal system which is based on "Common Law".

The examples below explain why it can be interesting for you as an entrepreneur to do business via Hong Kong.

1. The Hong Kong trading company

You have an enterprise that purchases goods in one country and sells these in another country. In such a case you could consider setting up a Hong Kong trading company through which you would transact your purchases and sales. The annual profit made by the trading company is taxed at 16.5%. Under certain conditions the trading company can even be exempted from paying profit tax. In principle, taxes are raised only on income generated from or in Hong Kong. You may keep the profits in Hong Kong for (new) investments. If you decide to distribute the profit to the shareholder, no dividend withholding tax will be applied.

2. The Hong Kong holding company

The Hong Kong Limited is a legal entity which can be compared with the BV in the Netherlands or the GmbH in Germany. The Hong Kong Limited can hold shares in other companies. That means you could incorporate a Hong Kong Limited to hold shares in a WFOE (Wholly Foreign Owned Enterprise - a legal entity in Mainland China, with its shares wholly owned by a foreign company or entrepreneur).

When the shares of a WFOE are directly held by a foreign company, the tax on distributions of profit amounts to 10%. Since Hong Kong and Mainland China have entered into the Closer Economic Partnership Agreement (CEPA), this rate can be reduced to 5%.

Hong Kong has into tax treaties with other countries, whereby the rates regarding tax on profit distributions to a Hong Kong Limited are reduced.

3. The Joint Venture

It is not only for tax reasons that a Hong Kong Limited is used. The Hong Kong Limited is also very suitable for a Joint Venture. Hong Kong has an independent legal system that offers you a reliable and comprehensive framework for your business setup in Mainland China with your Chinese partner. You can both opt for having a Hong Kong Limited holding all the shares in a WFOE, while each of you holds 50% of the shares in the Hong Kong Limited.

In case you wish to transfer your interest in the enterprise not (all) the complicated legal regulations of Mainland China may be applicable. The transfer of the shares of a Hong Kong Limited is simple and can be arranged quickly. Also if you and your Chinese business partner have a dispute, this can be settled more reliably through the courts in Hong Kong where Hong Kong law is applied.

If you consider doing business via Hong Kong, it is important that you discuss and plan this with your tax advisor from Belasting Collectief Nederland. He/she can advise you on the tax consequences in the Netherlands in relation to your activities in Hong Kong and/or Mainland China.

The Hong Kong and Mainland China consultant firm cooperating with Belasting Collectief Nederland has Dutch, English and Chinese speaking consultants. They will gladly assist you further to set up the activities in Hong Kong and Mainland China.

Laatst aangepast op dinsdag, 03 juli 2012 19:43
Wim Dijkstra

Wim Dijkstra is mede eigenaar van Stetler in Haren en gespecialiseerd in complexe fiscale ondernemersvraagstukken.

T: 050-5798451 | Kantoor: Stetler

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